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Findings from several studies on corporate mergers and acquisitions during the 1970’s and 1980’s raise Line questions about why firms initiate and (5) consummate such transactions. One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability. A second study (10) concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the (15) announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids. Yet merg- (20) ers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones. Acquisitions may well have the desirable effect of channeling a nation’s 23 (25) resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or (30) their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive (35) compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of (40) bidders may derive from modeling: a manager does what other managers do.
Q11: According to the passage, during the 1970’s and 1980’s bidding firms differed from the firms for which they bid in that bidding firms A. tended to be more profitable before a merger than after a merger B. were more often concerned about the impact of acquisitions on national economies C. were run by managers whose actions were modeled on those of other managers D. anticipated greater economic advantages from prospective mergers E. experienced less of an increase in stock value when a prospective merger was announced Answer: -------------------------------------------------------------------------------- Q12: It can inferred from the passage that the author would be most likely to agree with which of the following statements about corporate acquisitions? A. Their known benefits to national economies explain their appeal to individual firms during the 1970’s and 1980’s. B. Despite their adverse impact on some firms, they are the best way to channel resources from less to more productive sectors of a nation’s economy. C. They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers. D. They will be less prevalent in the future, since their actual effects will gain wider recognition. E. Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur. 23 Answer: -------------------------------------------------------------------------------- Q13: The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970’s and 1980’s? A. Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were. B. Managers miscalculated the value of firms that were to be acquired. C. Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. D. Total compensation packages for managers increased during that period. E. The value of bidding firms’ stock increased significantly when prospective mergers were announced. Answer:
*****I do not know what i was thinking or what i understood, but got all the selected answers wrong.******
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Re: Findings from several studies on corporate mergers and
[#permalink]
18 Oct 2006, 17:38
E---->isn't that explicitly stated in the passage.
E--->the whole passage is meant to convy that.
B---->one of the reasons given by the author of the passage
Re: Findings from several studies on corporate mergers and
[#permalink]
18 Oct 2006, 17:48
Q11: E Q12: E Q13: B
Q11 A. tended to be more profitable before a merger than after a merger
- not mentioned in the paragraph.
B. were more often concerned about the impact of acquisitions on national
economies
- not directly mentioned.
C. were run by managers whose actions were modeled on those of other managers
- same as B
D. anticipated greater economic advantages from prospective mergers
- they *only* say that they expect economic advantages from mergers.
E. experienced less of an increase in stock value when a prospective merger was announced
- this is the result of the third study cited. MY CHOICE
Q12: It can inferred from the passage that the author would be most likely to agree with which
of the following statements about corporate acquisitions?
A. Their known benefits to national economies explain their appeal to individual firms during the 1970’s and 1980’s.
-Lines 23-26 actually argue against this claim. OUT
B. Despite their adverse impact on some firms, they are the best way to channel resources from less to more productive sectors of a nation’s economy.
- It may be one of the ways but nowhere does it say it is the *best* way. OUT
C. They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers.
- these are likely causes, but are NOT compared in the paragraph OUT
D. They will be less prevalent in the future, since their actual effects will gain wider recognition.
-no such conclusion is provided OUT
E. Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur.
-Lines 31-33 clearly state this. MY CHOICE
Re: Findings from several studies on corporate mergers and
[#permalink]
21 Feb 2012, 19:28
In last question # 13 which is about the partial explanation for acquisition behavior; I really don't don't understand this one. OA is B.....why can't it be d?
Are findings of studies (listed in the passage) possible explanations of Mergers or are these findings possible objections to the mergers?
"possible partial explanation" - does this refer to economic reasons or non- economic reasons mentioned by the author in the end of the passage?
Re: Findings from several studies on corporate mergers and
[#permalink]
07 May 2018, 07:37
They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers - Can anyone tell me the meaning of this line ?
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This topic has been closed and archived due to inactivity or violation of community quality standards. No more replies are possible here.
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gmatclubot
Re: Findings from several studies on corporate mergers and [#permalink]